Correlation Between Travel Leisure and TUI AG

Can any of the company-specific risk be diversified away by investing in both Travel Leisure and TUI AG at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Travel Leisure and TUI AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Travel Leisure Co and TUI AG, you can compare the effects of market volatilities on Travel Leisure and TUI AG and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Travel Leisure with a short position of TUI AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travel Leisure and TUI AG.

Diversification Opportunities for Travel Leisure and TUI AG

0.44

Correlation Coefficient

Travel Leisure  TUI AG

Very weak diversification

The 3 months correlation between Travel and TUI is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Travel Leisure Co and TUI AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TUI AG and Travel Leisure is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Travel Leisure Co are associated (or correlated) with TUI AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TUI AG has no effect on the direction of Travel Leisure i.e., Travel Leisure and TUI AG go up and down completely randomly.

Pair Corralation between Travel Leisure and TUI AG

Considering the 90-day investment horizon Travel Leisure Co is expected to generate 0.86 times more return on investment than TUI AG. However, Travel Leisure Co is 1.17 times less risky than TUI AG. It trades about -0.14 of its potential returns per unit of risk. TUI AG is currently generating about -0.21 per unit of risk. If you would invest  5,331  in Travel Leisure Co on October 11, 2024 and sell it today you would lose (231.00) from holding Travel Leisure Co or give up 4.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Travel Leisure Co  vs.  TUI AG

Travel Leisure

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Travel Leisure Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Travel Leisure may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TUI AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TUI AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, TUI AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Travel Leisure and TUI AG

The main advantage of trading using opposite Travel Leisure and TUI AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travel Leisure position performs unexpectedly, TUI AG can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in TUI AG will offset losses from the drop in TUI AG's long position.

The idea behind Travel Leisure Co and TUI AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.